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Avoiding pitfalls in China's electricity sector reforms

M. R. Davidson, I.J. Pérez-Arriaga

The Energy Journal Vol. 41, nº. 3, pp. 119 - 141


China has recently reinvigorated reforms to its electricity sector, focusing on increasing the role of markets and improving regulation. While restructuring an electricity sector is difficult and can require years of detailed planning, China's approach relies upon broad central guidelines with many details and initiatives left to provincial governments. We assess the current state of reform efforts through the lens of five "pitfalls" based on well-established regulatory economics literature and international lessons, focusing on contract structure, system operation, and regulation. We find that while market efforts are likely to achieve efficiency gains with respect to the planned system, they may fall short of crucial functions of a market, such as incentivizing flexibility given increasing renewable energy penetrations. Making markets work will likely require a stronger centralization of market design and regulatory oversight authorities.

Keywords: Market liberalization, Electricity restructuring, Renewable energy, China

JCR Impact Factor and WoS quartile: 2,414 - Q2 (2020); 2,900 - Q2 (2022)

DOI reference: DOI icon https://doi.org/10.5547/01956574.41.3.mdav

Published on paper: May 2020.

M. R. Davidson, I.J. Pérez-Arriaga, Avoiding pitfalls in China's electricity sector reforms. The Energy Journal. Vol. 41, nº. 3, pp. 119 - 141, May 2020.

    Research topics:
  • Green energy integration
  • Energy markets design and regulation
  • Analysis of sustainable energy policies
  • Unit-commitment in electricity markets with high RES penetration